PUC launches probe into breach at PG&E substation in San Jose

SAN JOSE -- State regulators Thursday opened an investigation into the second major security breach at PG&E's Metcalf electricity substation in South San Jose amid rising criticism about how the embattled utility safeguards the region's vital electrical system.

A theft early Wednesday morning came at the same substation that in April 2013 suffered a sniper attack that knocked out 17 giant transformers which help supply power to Silicon Valley. A former top federal official later labeled that a terrorist attack, although the Federal Bureau of Investigation disagrees with that assessment. The incident remains unsolved.

In the latest incident, thieves penetrated a perimeter fence and made off with several pieces of construction equipment. The theft came despite PG&E's launch of a $100 million upgrade of its security systems at an unspecified number of critical electricity substations in the company's territory, including the Metcalf station.

"This is an embarrassment for PG&E," said Steven Bucci, a security expert with the Heritage Foundation think tank. "The first Metcalf attack should have been a wake-up call for PG&E. But the fact that this happened again is a very bad sign."

The Santa Clara County Sheriff's Office is also investigating the matter, and PG&E is conducting its own investigation.

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"The CPUC is investigating the incident at the Metcalf station," PUC spokesman Andrew Kotch said Thursday.

The thieves set off a perimeter fence alarm shortly after 2 a.m., and the alarm was received at the utility's central security dispatch, PG&E spokesman Joe Molica said. However, the dispatchers failed to notify the two-person security team that works overnight at the substation about the alarm. PG&E didn't report the theft until 7:30 a.m., when it notified local law authorities, said Sgt. Kurtis Stenderup, a spokesman for the Sheriff's Office. The utility publicly disclosed the theft late in the afternoon.

The crooks in this week's heist invaded the Metcalf substation and stole construction equipment that included two soil compactors, one or more pipe threaders and a cart, Molica said, which could be used for a variety of work, including the security upgrades taking place at the facility. The Metcalf substation is part of a network of power facilities that serves southern Santa Clara County and provides electricity to tens of thousands of residents.

"There is really no excuse for PG&E's failure to adequately protect this facility," Bucci said. "What if this had been another attack on the electricity system? The thieves could have done anything once they were inside the perimeter."

PG&E needs close supervision of its physical security efforts at its substations, said state Sen. Jerry Hill, a Democrat from San Mateo County who is a harsh critic of the utility and the PUC in the wake of a fatal explosion of a natural gas pipeline in San Bruno in September 2010. Hill is the author of a bill, SB 699, currently wending its way through the state Legislature, that would direct the PUC to establish security standards for the electricity system in California.

"What PG&E is doing doesn't seem to be working," Hill said. "We need independent oversight to validate the work PG&E is doing and the claims they are making."

Utilities such as PG&E will have to transform their mindset to adequately protect their electricity and gas assets, Bucci said.

"PG&E and other power companies have always done things the same way, but what they have always done is not good enough," Bucci said.

San Francisco-based PG&E already faces fines that together could total $3.58 billion for its role in the San Bruno explosion. That includes a fine of up to $2.45 billion from the state PUC for San Bruno and a fine of up to $1.13 billion, depending on the outcome of a felony prosecution by the federal government on criminal charges linked to San Bruno. In addition, a federal grand jury is investigating a gas explosion in Carmel earlier this year.

Ultimately, PG&E's shareholders might be obliged to foot the bill for a top-flight upgrade of the utility's electricity grid, said Andres Carvallo chief executive officer with Texas-based CMG, a consulting company that specializes in smart grid issues.

"We have the know-how to solve these problems, but the issue is that we would need a lot of money to build a gold-plated system that would be able to withstand these kinds of invasions," Carvallo said. "There is a cost to provide this power, and the ratepayers of California will have to pay for a major overhaul."

Ratepayers already have done their share, said Mindy Spatt, a spokeswoman for The Utility Reform Network, a consumer group.

"The message that the PUC should be sending out to PG&E is PG&E has the money to do it right," Spatt said. "PG&E has the money, now it should give the ratepayers the reliability and safety that they have paid for."

PG&E said it's determined to get to the bottom of the incident.

"We want to prevent these incidents from happening again," Molica said. "We want to find any problems and fix them right away."